ARGENTINA: Buenos Aires enjoys property boom

Argentina is climbing out of its economic crisis by tempting foreigners to buy homes in its capital, writes Oliver Balch

Recycled, New York-style loft apartment. En-suite bedroom, plus spacious roof terrace. Located in the heart of one of the world’s most exotic capital cities. Price tag? Roughly the same as a private parking space in central London.

It is little wonder that foreigners are flocking to Buenos Aires to snap up the city’s property bargains. The most exclusive districts of the Argentine capital average between £1,000 and £1,600 per square metre.

By comparison to other major world cities, it’s a steal. A central apartment in Moscow will set you back around £2,700 per square metre. For London, prospective buyers are looking at closer to £3,580.

“Foreigners look around and they are thrilled with the idea of what they can get for their money,” says Cecilia Campbell of Buenos Aires-based estate agents, Reynolds Properties. Dan Perlman, a professional chef from the US, is one of those recently lured onto the Buenos Aires’ property ladder. Having sold his apartment in New York, he originally came to spend a few months just to get to know the city.

“I found that I really liked it here,” says Mr Perlman, the new owner of a spacious apartment in Buenos Aires’ Recoleta neighbourhood.

Recoleta’s Parisian architecture and famous cafes make it one of the most popular buys for foreigners. Other classic favourites include the downtown district of Barrio Norte and the refurbished port area of Puerto Madero.

Property prices have been rising steadily over the last few years, as Argentina begins to climb out of a major economic crisis in 2001-2002. House prices in the Buenos Aires’ wealthier districts shot up as much as 25% last year.

The market is showing signs of stabilising now. All the same, investors in buy-to-rent properties can still expect rental income worth 4%-6% of the original sale price.

But the big gains are to be made in the city’s less traditional areas, says Argentine independent property agent, Maria Garvey: “There are still plenty of great opportunities for investors ready to take a risk with more up-and-coming neighbourhoods.”

“Lots of foreigners, for example, are interested in purchasing in off-beat districts like San Telmo and Barracas, where there are still some real bargains. Right now,

Palermo Viejo is the really hot place to buy.” Once home to writer Luis Borges, Palermo Viejo’s bohemian feel has given way to a seriously trendy vibe in recent years. Its cobbled streets are now awash with fashionable boutiques, ultra-cool bars and multiple ‘for-sale’ signs. Palermo Viejo’s cachet is most evident in the desperate rebranding attempts of its estate agents. Potential buyers now have to negotiate the subtle differences between Palermo Soho, Palermo Hollywood and, the latest, Palermo Queens.

American-born Jennifer Juhasz, owner of a film production company, bought a £97,000 property in the area early last year. When she came to sell in May, she faced a “bidding war”. The two-bedroom house eventually went to a Canadian investor for £160,000.

Foreigners are now responsible for almost one in three sales in these and other sought-after post codes. Britons and Americans make up the largest proportion of buyers, followed by the French and Spanish.

But Buenos Aires’ property boom comes at a cost. Property values, as with everything else, dropped like a stone in the wake of Argentina’s crippling devaluation almost five years ago. Saddled with spiralling personal debts and unmanageable dollar mortgages, many home-owners had to put their main asset up for sale.

Meanwhile, the foreign money flowing into Buenos Aires’ housing market has helped property values rebound to almost pre-crisis levels, particularly at the top-end of the market. As a consequence, many Argentines are now finding themselves squeezed out of the property market altogether.

Magdalene Morales, aged 26, blames the continued valuation of houses in US dollars as the major barrier to getting on the property ladder. Following a pre-crisis parity with the peso, the US dollar is now valued at more than three times its Argentine equivalent.

“The high price of property makes it impossible for young people who are just getting started and dream of getting their own house,” she complains.

The problem can be seen most clearly in the rental market, she insists: “The steady stream of foreigners has provoked a boom in short and long-term rents. Many property owners only rent to foreigners because that way they can get a much higher price”.

Like many people her age, Ms Morales continues to live at home with her parents.

An additional difficulty facing Argentine house-buyers is the lack of affordable credit. Most mainstream banks do offer mortgage services, but few are tempted by the astronomical repayment rates.

But not everyone points the finger at foreigner investors. Wealthy Argentines, who either avoided the economic crash or have prospered during the country’s gradual recovery, are also ploughing money into the housing market.

As 35 year-old Cristia¡n Santillan, a salesman with a pharmaceutical company and recent first-time buyer, puts it: “After the 2001 crisis, Argentines no longer trust the banks. They prefer to put their money into property because they see bricks and mortar as being more secure.”

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Les Calvert is the owner of overseaspropertymall.com and many other property and travel related websites. Les writes news and articles on the overseas property market for leading websites, trade magazines and newspapers.